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Some musings on things

Virtue Laundering

16/5/2017

3 Comments

 
Interrupting our family’s viewing of The Bachelor recently were some TV ads for Z Energy’s Good in the Hood.

This is an annual campaign they do whereby four local charities for each service station are profiled and customers get to put their plastic disc into the bucket of the charity that resounds with them.  Each service station has around $4,000 to give away from a total pool of $1m.  You may recall last year I had a look at one of the recipient charities.

I have a bit of discomfort with the whole deal.  It’s really a popularity contest, where those groups with the best “brands” get the most tokens.  Not really taken into account is what the organisation actually will do with the money, nor if they actually need it in the first place.  For some of these charities, $1,000 (assuming each charity gets ¼ of the money) that’s a big help, for others, its hard to see how this makes any difference.

I would love to know how much they are spending marketing this programme: images of the charities are all over their social media and website.  The annual accounts show that Z spent $36m on marketing in the 2017 financial year.  I am guessing that most of this went on other stuff, but it’s interesting to contemplate eh.  How much is spent actually giving and how much is spent telling people about it?  Is this perhaps Virtue Laundering?

That said, they did pay $99m in tax last financial year: probably more than either Mobil or BP did given transfer prices are often used to expatriate income and minimise taxation: I suspect paying the correct amount of local tax does far more Good in the Hood than the programme itself. 

Z of course are not alone here: McDonalds is worth a look. When you buy a Happy Meal, I believe 10 cents is given to the Ronald McDonald Houses.  This is of course Cause Related Marketing, and is really a marketing initiative.  I did my dissertation on this stuff back in the day, so have been looking at it for a while. 

There are two operational charities linked to Ronald McDonald House: a body running both Auckland and Wellington, and Christchurch (which also runs Invercargill). You can see all this information on the Charities Office website.

So – how much did McDonalds put into these facilities?  All up: around $170k ($99k from a Global Grant, and $70k from an RMHC Operating grant) and only to the North Island Ronald McDonald House Charities NZ Trust. 

Now, there is little publicly available information about all this.  South Island received zip from McDonalds, at least as I could see by looking at their accounts quite a few times.  The exception is the item called Money Boxes, which I assume is the change box at McDonalds – but that money comes from customers (I think).

If we assume that both the Global Grant and operating grant were covered by Happy Meals, then McDonalds sold 1.6m such meals last year.  That sounds a little off, so I am guessing that the Happy Meals Cause Related Marketing covered the operating grant (meaning they sold 700k Happy Meals) and the Global Grant came from the PR budget.

The annual reports (as reported in the Herald) show some $40m sent offshore for trademark and service fees, and total NZ taxes of $16.4m. 

Whatever way you cut it, it really does seem to be a good deal for McDonalds. Be interesting to see if some other entity wanted to buy naming rights: I reckon this is a good deal!

We are seeing blurred lines between charities, social enterprises, B Corps and for profit organisations, and it’s easy to get caught up in the hype of corporate responsibility.  As we consumers get more cynical about marketing efforts, organisations seem to be using the virtues of Not for Profits to launder a positive corporate brand to the world.  And that’s great – provided its on equal terms.  However, looking at the above I can’t help but think of a phrase from my drinking days: go hard or go home.  Really… the numbers above are rounding.

Love to talk with you if you think this is at all interesting.

3 Comments
Dave
20/5/2017 03:15:06 pm

Interesting that these examples are drawn from cartels: oil and fast food. That makes sense to me: cartels and monopolies adopt pricing strategies that hoover up the consumer surplus (see any microecon text). I can see virtue laundering as being a great way of repurchasing public support, having pursued pricing strategies that can and should annoy people. Z's timing is interesting, given that (I think..?) they used to play a role in limiting the effects of the cartel in petrol prices in NZ. It might be interesting to see if this sort of thing is more common in industries with few players. (Air NZ? Sky? Though I guess real monopolies don't have much of an incentive - they can just flip us all the bird, all the time.)

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Bridget Frame
22/5/2017 09:09:05 am

I think I agree Dave. Community seems to be a luxury of a higher margin environment... although whether its driven by an externality of a desire to repurchase public support, or wanting to be a good corporate citizen (I'd like to think the latter is slightly more altruistic than the more cynical former). Interestingly, check out the Jan blog "did you get your share". Sky gave $4m to its foundation... fairly low I would have thought given the harm they do within the community. So calling out these guys to me seems ok, but we can't let multinationals off the hook: paying a fair share of national taxes seems a far more important thing than dancing around the edges of "doing good".

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buy an essay cheap link
10/6/2017 07:29:58 am

Corporate responsibility is what keeps companies at bay in the customer's mind. I don't really care how they help, as long as they do it out of goodwill. Most companies wouldn't even bother doing their CSR activities successfully, just so that they can get fame out of it. I'm really disappointed with some of the companies you've mentioned. It seems that we are truly losing the importance of CSR activities and the essence of helping the community.

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